Operator: Welcome, ladies and gentlemen to the Gray Media's Q3 2024 Earnings Call. I will now turn the program over to Chairman and CEO, Mr. Hilton Howell, Jr.

Hilton Howell: Thank you, operator and good morning, everyone, and thank you all for being here. As the operator mentioned, I'm Hilton Howell, the Chairman and CEO of Gray Television. And with me here in Atlanta are all of our Executive Officers, Pat LaPlatney, our President and Co-CEO; Sandy Breland, our Chief Operating Officer; Kevin Latek, our Chief Legal and Development Officer and Jeff Gignac, our Chief Financial Officer. As usual, we will begin with a disclaimer that Kevin will provide.

Kevin Latek: Thank you, Hilton. Good morning, everyone. Gray Television, Inc., commonly known as Gray Media or Gray uses its website as a key source of company information. The website address is www.graymedia.com. We will file our Quarterly Report on Form 10-Q with the SEC today. Included on the call may be a discussion of non-GAAP financial measures and in particular, adjusted EBITDA, leverage ratio denominator and certain leverage ratios. These metrics are not meant to replace GAAP measurements, but are provided as supplements to assist the public in its analysis and valuation of our company. Included in our earnings release, as well as on our website are reconciliations of these financial measures to the GAAP measures reported in our financial statements. Certain matters discussed in the call may include forward-looking statements regarding, among other things, future operating results. Those statements are subject to a number of risks and uncertainties. Actual results in the future could differ from those expressed or implied in any forward-looking statements as a result of various important factors that have been set forth in the company's most recent reports filed with the SEC, including our most recent Quarterly Report on Form 10-Q and our most recent earnings release. Company undertakes no obligation to update these forward-looking statements. And now, I'll give the call to Hilton.

Hilton Howell: Thank you, Kevin. Gray Media is an exceptionally strong company that has continued to grow, invest and evolve to meet the challenges and opportunities in our ever-changing industry. We take great pride in reporting to you every quarter, great success in serving our communities and continuing to deliver financial results for all of our stakeholders. As you all saw in this morning's earnings release, Gray had a strong third quarter with our revenues largely in line with our guidance, with the exception of slightly lower-than-expected political advertising revenues. In addition, you saw that our expenses were well below the low end of our guidance range as we continue to focus on ways to be more efficient. Specifically, the highlights for the quarter are as follows. Total revenue in the third quarter was $950 million, an increase of 18% from the third quarter of 2023 due to the increase in political advertising revenue. Net income attributable to common shareholders was $83 million in the third quarter, compared to a net loss of $53 million in the third quarter of 2023. Adjusted EBITDA was $338 million in the third quarter of 2024, an increase of 61% from the third quarter of 2023. Core ad revenue in the third quarter of 2024 was $365 million, an increase of 1% from the third quarter of 2023. Political ad revenue in the third quarter alone was $173 million, which was slightly below our guidance range, but only $17 million below our political advertising revenues in the record year of 2020. At the end of third quarter, our leverage ratio is calculated in our senior credit agreement net of all cash was 5.67 to 1.00, as we repaid almost $250 million during the third quarter and are looking at a total repayment of $0.5 billion by the end of the year. We are proud that we have managed to grow our core ad revenue in the third quarter despite some headwinds and political displacement. Our exceptionally strong station sales teams continue to drive core ad revenue growth, particularly within digital and new local direct sales channels by continuing to execute on the mission of delivering exceptional value and reach for our advertising clients. Many of our Southeastern markets suspended and/or curtailed airing commercials in the last days of the third quarter as they ramped up coverage of the threat from Hurricane Helene and the terrible damage that followed. We believe that our commitment to those communities made a significant difference before and after the storm, and we believe perhaps saved a number of lives, particularly in the affected areas of Florida, Georgia and our North Carolina communities. Our political ad revenue was very strong in the first half of the year relative to 2020 when you adjust for the absence of a competitive presidential primary in either party. We began the third quarter with strength and optimism as we saw all the ingredients of a record political cycle. As we saw two years ago, many of the expected competitive races and ballot issues were simply not that competitive by Labor Day. Thereafter, tremendous amounts of political ad spending shifted to a fewer number of more competitive races that largely fell outside of our station footprint, essentially Montana and Pennsylvania. In the end, our third quarter political ad revenue was quite strong, yet finished below our record third quarter political ad revenues in 2020. For the full year for 2024, we expect approximately $0.5 billion of political revenue, which as it appears to us makes us the largest recipient of political ad dollars in the television broadcasting business on both a gross and a per TV household basis. That is something that we are exceptionally proud of, because we reached 36 in some of our competitors, double our reach. So, we're happy to be at the top of that pile. Today's earnings release also highlighted that the company is not sitting still. We are continuing our keen focus on developing local, direct and digital business across our station footprint. We are continuing to produce news and investigative pieces that local audiences want. In fact, we recently had five stations in our national investigative unit -- investigative unit, InvestigateTV, received 8th National Edward R. Murrow Awards for Excellence in Journalism. We also are continuing to expand our local sports broadcast. On the expense side, we launched a significant cost containment exercise this past August that touches nearly all aspects of the company. As Pat will explain, the leadership team here has worked hard to find more efficient ways to continuing delivering the highest level of service to our local communities and customers without impacting our values, our news coverage or our sincere commitment to our local communities. Reducing debt and leverage remains our top capital allocation priority. We have taken concrete steps to act on this priority and we will continue to do so until we have achieved our goals in this area. Our earnings release details our most recent efforts, which Jeff will address further later in the call. Looking ahead to 2025 and beyond. we are taking actions necessary to be a stronger, more efficient and impactful company that is the best equipped to compete in the ever-changing business environment. What you read in today's press release and will hear in today's call will reinforce our commitment to positioning the company for long-term success. And now, I will ask Pat to provide more color on our operations.

Pat LaPlatney: Thank you, Hilton. Our core ad revenues this quarter were 1% higher than the third quarter of 2023, which is also 1% ahead of the third quarter of '22. As Hilton mentioned, our core ad revenue strength occurred despite a number of headwinds, particularly political displacement. This achievement is driven by our success in recruiting new local businesses to advertise on our stations and/or digital platforms. Our new local direct business in Q3 2024 was up almost 14% over Q3 2023. In our local markets that are audited by a third party, the audits show that we increased our share of the total local TV ad markets to a new third quarter record. These results are very encouraging and gratifying, especially because many stations posting share growth in these audits did so as affiliates of CBS, ABC and FOX competing against the record viewership of the Paris Olympics this summer. Our NBC stations performed well at the Summer Olympics, generating north of $20 million, some of which was political advertising. Digital ad sales continues to be a bright spot for us. We are seeing year-over-year double-digit growth rates and new records for digital ad revenue, and new digital accounts nearly every month. In the third quarter, we had 22 markets that more than $1 million in digital ad sales, which is a new record for us. In terms of political ad revenue, Hilton provided a good description of the political ad landscape for us. Our political ad revenues were, from a historical basis, quite strong going into third quarter. As the third quarter progressed, it appears that the political parties felt there were fewer truly competitive Senate and the gubernatorial races in our footprint. We expect that when the year ends, we will see our political ad revenue in 2024 meeting or exceeding 2020 numbers at the present level, the house level, state and local level, as well as issue and ballot initiatives. The only category, where we saw revenue decrease occurred in Senate races, which has long been our largest political ad category. In 2020, our current station portfolio had about $331 million of political revenue from Senate races, including the two Georgia runoffs versus $121 million of political ad revenue for Senate races this year. The $200 million difference resulted from less spending in some competitive Senate races in our footprint this year compared to 2024. In the end, we brought in about $0.5 billion, which is a lot of money, which we'll use to pay down debt. In most quarters since the end of the pandemic, Gray has beaten the public peer group average year-over-year in core ad revenue performance, and it appears that we led the peer group average again, in the third quarter. Despite this momentum, we anticipate that core ad revenues in the fourth quarter will be down compared to '23. For context, in 2020, core ad revenue from our current station group declined 10% in the fourth quarter from the prior year due primarily to total displacement and COVID pressures. In Q4 '22, our core ad revenue declined 4% from Q4 '21. We also attribute a significant piece of our core ad revenue slowdown to the move of Southeastern Conference Football from CBS to ABC. We are the largest CBS affiliate owner and we have CBS as our affiliation in many Southeastern markets; think Atlanta, Knoxville, Baton Rouge, Lexington, Waco, College Station, among others. The replacement of SEC with Big 10 will reduce core and political ad revenue in the fourth quarter. Overall, for the full-year 2024, we expect core ad revenue to be down slightly, which is not unusual in the political year. On the expense side, for the third quarter of 2024, our broadcast operating expenses and corporate operating expenses were $14 million and $3 million below the low end of the expense guidance ranges respectively. For full-year '24, we currently expect broad CapEx and corporate OpEx to be significantly below our initial full-year guidance provided in February. To prepare for 2025, we launched a major effort in August to review spending across the company and to find ways to streamline operations without cutting back on the mission to serve our communities. Since August, we've identified and begun implementing various initiatives that will allow us to reduce our operating expense run rate by approximately $60 million on an annualized basis. We're also closely evaluating our capital expenditure needs for 2025. Most of our expense reductions involve non-personnel expense categories. We've also taken steps to reduce our personnel expenses. Beginning in August, we eliminated positions by suspending recruiting and by not filling certain positions following attrition in the ordinary course. We also made some targeted reductions in headcount. Every individual, who is directly affected has played an important role in the success of our company. These actions are personally difficult for everyone at Gray and particularly painful for those impacted by the job restructurings. They are, however, looking for the company to operate more efficiently for the long-term benefit of all other employees and the communities that depend on us. Sandy will now address some important operational developments.

Sandy Breland: Thank you, Pat. Once again, in the third quarter and into the fourth quarter, our stations along the Gulf Coast served as a critical lifeline of information for communities dealing with devastating storms. Our trusted news and weather teams provided around-the-clock coverage of hurricanes Francine, Helene and Milton, even while some of the homes our own employees suffered damage from those storms. But we didn't let that slow us down. In late September, we announced a significant media rights deal with the New Orleans Pelican. It brings every non-national Pelican NBA game to 4.1 million households through Gulf Coast Sports and Entertainment Network, our new multi-state distribution venture that is anchored by our New Orleans television station. Continuing with this momentum, our stations will be broadcasting an ever-increasing number of local and regional games from professional and college teams through this fall and next spring, from the Chicago Bulls, Blackhawks and White Sox games to the NBA Mavericks and the NHL Kraken. Finally, this brings me to a question [Technical Difficulty].

Operator: Ladies and gentlemen, it looks like we lost the speakers' line. We will get them back on promptly.

Hilton Howell: Hello. This is Hilton Howell. Apparently, we got cut off right we believe, where Sandy began her comments. And so, once again, let me turn it over to Sandy Breland, our Chief Operating Officer, for her to reboot and restart. Thank you.

Sandy Breland: I hope it wasn't something I said. Once again, in the third quarter and into the fourth quarter, our stations along the Gulf Coast served as a critical lifeline of information for communities dealing with devastating storms. Our trusted news and weather teams provided around-the-clock coverage of Hurricanes Francine, Helene and Milton, even while some of the homes of our own employees suffered damage from those storms. This is where local broadcasters best serve their community. But we didn't let the storm slow us down. In late September, we announced a significant media rights deal with the New Orleans Pelicans. It brings every non-national Pelicans NBA game to 4.1 million households through Gulf Coast Sports and Entertainment Network, our new multi-state distribution venture that's anchored by our New Orleans television station. Continuing with this momentum, our stations will be broadcasting an ever-increasing number of local and regional games from professional and college teams through this fall and next spring, from the Chicago Bulls, Blackhawks and White Sox games to the NBA Mavericks and the NHL Kraken. Finally, this brings me to a question we get asked sometimes by investors as to why businesses, political campaigns and local sports teams want to be on local television. We keep sharing our news ratings results, including a deep dive in an October 2023 investor deck. Still, I think it's worth answering this question with an interesting comparison between the top-rated cable news show and our own local newscast. In the third quarter of 2024, the FOX News program 5, which is available in 67 million homes, pulled in more viewers than any program on cable with an average of 3.5 million viewers. That's impressive, but not nearly as impressive as Gray's 5 PM newscast, which are available in 36% of U.S. households. Collectively, our 5 pm newscast averaged 4.4 million viewers. That's 25% more viewers than the five despite reaching less than one half as many homes. Think about that. That is the power and reach of local broadcast television, and that's the reach that local businesses, political campaigns and local sports teams need, want and can get from Gray Media. We're obviously very proud of the great work of our news teams from coast to coast. And these ratings show our loyal viewers appreciate and depends on their important work. I now turn the call over to Jeff.

Jeff Gignac: Thank you, Sandy. The team has already covered our Q3 and our outlook. So, my comments will focus on our balance sheet. As Hilton mentioned earlier, reducing debt and leverage remains our top capital allocation priority. We continue to improve our balance sheet in Q3. During the quarter, we reduced our outstanding debt principal balance by $246 million, returning our first lien and total leverage levels to 3.0 and 5.67 times respectively. This is in line with the levels following our early June refinancing and a sequential improvement of approximately a quarter turn of leverage from June 30, 2024. The debt reduction during third quarter was completed through a combination of open market repurchases under our previously-announced board authorization and repayments at par. In addition to the previously-announced $29 million repurchase of our 2027 notes at 92.1% of par, we repurchased approximately $16 million of our 2021 Term Loan D at an average price of just under 91% of par. During Q3, we repaid the full $200 million that was drawn under our $680 million revolving credit facility at June 30. Also during Q3, we entered into agreements whereby we will retire an additional $39 million of our 2021 term loan at an average price of 92.6% of par, which we expect to close in November of 2024. Looking forward for full-year 2024. We expect to reduce our total net debt outstanding by approximately $500 million. We announced this morning that our board has authorized a reset of our open market repurchase authorization to $250 million. And we will continue to take a balanced approach and look to capitalize on opportunities to efficiently reduce our debt. One notable to our free cash flow outlook that I'd like to highlight is on the tax side. As you may have seen in our release, we determined during the course of filing our 2023 tax return that the portion of our interest expense attributable to real estate primarily due to Assembly Atlanta coming online is fully deductible rather than limited under IRS rules. As a result, we expect to benefit from that deduction in our cash tax payments this year and on a go-forward basis. So, to summarize, we're continuing to execute on the plan and pulling the levers that we have available to us to generate cash flow. The actions that we've taken on the expense side, a closer look at our capital needs and repaying our debt to reduce our interest burden all enhance our cash flow profile going into 2025. This concludes my remarks. And I will now turn the call back to Hilton for some closing remarks.

Hilton Howell: Thank you, Jeff. Operator, at this time, we ask you that you open up the line for any questions for any of our leadership team.

Operator: [Operator Instructions] And we'll take our first question from Aaron Watts of Deutsche Bank.

Aaron Watts: Hi, everyone. Thanks for having me on. I have a couple of questions. The first is a question around your core ad guidance. I'm hoping you can parse out your 4Q down 10.5% guide a bit more. Are you able to say how much of that was weather related? And it'd be really helpful to hear what you're seeing in the post-election core ad environment generally, areas of strength, weakness et cetera and how things feel turning the corner into 2025? I guess, second, Jeff, I'd point your way with regards to the $60 million of run rate savings you announced. How should we think about the timing of that phasing in and hitting the P&L over the next several quarters? And are there any further cost actions you're exploring in any ways to kind of frame that incremental opportunity? And then finally, just regarding capital allocation, it sounds like the focus remains on debt reduction. Do you envision continuing to be in the market repurchasing front-end loans and bonds? How do you think about the timing of potentially accessing the capital markets to address your first maturities? And has there been any further consideration on reducing the dividend? Thank you.

Pat LaPlatney: Thanks, Aaron. It's Pat LaPlatney. I'll start. Q4, number of factors at play here, right. So, there's political crowd out. We talked about SEC, which is for us is material. And then we have some -- I would say that I'd say going forward, which I think was the thrust of your question, we are cautiously optimistic about the remainder of the quarter. We have seen some green shoots just in the last couple of days, which we think is a good sign and to be candid not completely unexpected. So, the better -- the more improvement we see in Q4, the more optimistic we are by Q1 2025 and the remainder 2025. So, I think there's some reason for optimism there. Jeff, I know you got a bunch of questions out there.

Jeff Gignac: Yes. Aaron, I jotted down a list. So, I'll try to tick through them in the order. And if I miss anything, just weigh in. So, first of all, on the $60 million of run rate savings and the timing of those, I guess most of that, especially the personnel piece of that is already completed. So that's already we're already -- we've already achieved that. It's in the rearview mirror and that will start filtering through. I think you should think about that as much as anything as bending the curve. If you look over the last couple of years and quarters, you've seen our run rate on expense growth come down. So, you'll continue to see that come down as a result of these actions. There are a number of things that were renegotiation of contracts and workflow changes that we were able to make. And those will take a little bit longer, but it'll be in starting beginning of the year in first quarter. In terms of further cost actions, look, we're continuously monitoring it. but there's nothing specific that's been identified as of right now. So, we'll continue to look at things, but nothing else planned at the moment. Capital allocation, so you can see that we reloaded the $250 million authorization from the board. So, we're going to continue to be guided by where we can get good value. We can go -- it's not in any tranche of debt. And so, we'll look at where things are trading. We will look if there's an opportunity to tap the capital markets to -- at a reasonable price that doesn't work against us too much in terms of cash flow and delevering, that's certainly of interest. And then, on the dividend, Hilton can weigh in on this as well, but I would say that we look at it from quarter-to-quarter. And where we sit today, we're comfortable paying it for this quarter. Hilton, I don't know if you want to comment any further on that.

Hilton Howell: No further comment right now.

Aaron Watts: All right. Thanks guys. Appreciate the thoughts.

Pat LaPlatney: Thank you, Aaron.

Operator: All right. Next up, we have Marlene Piero [ph].

Unidentified Analyst: Thank you for taking my questions. You actually just addressed many of them. A quick one though, in terms of the political, is it possible to provide some number around potentially the impact from the hurricane specifically? Meaning what would political have been without that hurricane impact? Thank you.

Hilton Howell: It's a few $1 million.

Unidentified Analyst: Okay, great. Thank you. All right.

Operator: Next up, we have Patrick Sholl of Barrington Research.

Patrick Sholl: Thank you. I was wondering with the political, if you're seeing any like difference between maybe, local affiliates and networks and just sort of your opportunities within selling on the station apps and the ability that you're able to capture some viewing share shift there?

Hilton Howell: Patrick, we didn't you kind of cut in and out there. Could you repeat that question? I'm sorry.

Patrick Sholl: Yes. I guess what I was trying to ask was, is there any sort of shift between political and buying local stations versus networks trying to reach buying on the networks versus and your ability to sell political inventory on the station apps versus in the linear broadcast and being able to capture any of that share shift there?

Hilton Howell: Yes. So, if you look through our political results, we talked about this a little bit. All of our categories were up, all the different categories of political spending were up with the exception of Senate, which historically has been far and away our largest. So, we -- the money was there in the market. It just got shifted out of our footprint essentially. And a lot of it, as Hilton mentioned, landed in Pennsylvania and Montana.

Patrick Sholl: Okay. And then just within the core ad verticals, are you seeing any sort of like strength or weaknesses across different categories or industries?

Hilton Howell: Yes. So during Q3, it was a mixed bag. Auto has been weak for us. It was weak in third quarter. Candidly, it's weak in fourth quarter. Communications category has been somewhat weak. And then look, given we talked a little bit about political crowd out, but there was also there was political hesitancy as well. People held on to their money, either not to be on the air during the onslaught of political ads or not really understanding what the economic outlook would be depending on which party prevailed the elections, right. So that impacted a lot of different categories. As we talked about before, we're starting to see some green shoots coming out of the election. And so, we're cautiously optimistic, but we would expect most of those categories to improve for the remainder of fourth quarter that pick up next year.

Sandy Breland: Yes. And just one other interesting note on that, even with the strong political in October, our new local direct is up year-over-year, fueled mainly by digital and that's consistent with the laser focus we've had on growing new local direct.

Patrick Sholl: Okay. Thank you.

Operator: All right. Next up, we have Doug Pardon of Brigade Capital Management.

Doug Pardon: Hi. good morning, guys. Just wanted to change directions a little bit, lost in the noise of with us some bad luck maybe with political and the hurricanes. Is retrans kind of beat our number on both a gross and a net basis, and it looks to me like retrans expense might be down on the year? Can you just talk a little bit about -- that's something you guys have talked; can you just talk a little bit about that and your confidence as you look at retrans next year, because I think that's been probably one of the biggest concerns for investors. And then I have a couple more after that.

Kevin Latek: Hi, Doug. this is Kevin. Our core retrans has been in really growth mode for a long time. And we certainly saw this year that we went from being -- from growing a little bit -- growing a lot to growing a little bit and this year went backwards. And we talked a lot on the prior calls, we've been getting the rate increases we want. We've been really struggling with the sub-erosion. Our sub-numbers are -- and you see this for all media companies, the sub situation has not been getting much better. There are some hopeful signs in the recent Comcast and Charter sub-reports that maybe their sub-losses have stabilized. So, we were predicting that the sub-declines would stabilize earlier this year. It seems that we now have folks kind of coalescing on the idea that it's probably later this year, maybe next year, we see the sub-declines, the rate of growth slowing. And our math or I should say, our gross revenue in this area is really a simple formula. It's a rate times the number of subs for each of the operators. So, as these sub-numbers, the declines mitigate our growth will improve. It's beyond our control and it's kind of that simple. We've talked a lot about why we think, we should be seeing that rate of growth slow. So, we'll go into that again. But we are certainly optimistic it's going to be that we have seen kind of the worst of it now and we're going to move forward with a world, where the sub-declines are muted. And I think you've heard that from some of our peers and some third-party folks as well. On the network fees, we've said for a while that the network fees need to come down. They were priced in a different world under different factors. And there's been -- we've had some success with our contracts. We start bringing those fees down. We have more work to do. We have a lot of more work to do over the next roughly 14 months as we renegotiate with all four networks for the next round of contracts. And I can tell you that the focus on costs, which every quarter we've talked about bringing our costs below, cutting our cost guide and the actions we disclosed on that earnings call today, make it pretty clear that we're really focused on bringing our cost down and that's not just operational cost, and that is going to include our network fee. So, we're not giving any guidance obviously on next year, but those are kind of the ingredients of things we're looking at.

Hilton Howell: Yes. let me just emphasize one point that Kevin made. The $60 million does not include anything related to any network agreements.

Doug Pardon: Great. And then just changing gears. On the political side, is there anything structural about your footprint that causes you concern? Or is this just simply a case of bad luck?

Hilton Howell: Actually, we didn't have any bad luck. We had $0.5 billion, which is the largest gross number of political ads of any peer in the broadcast sector. And so, the really only difference --

Doug Pardon: Okay. But that said, you guys did -- you did kind of at least miss people's expectations. And I think it's because of just where some of these races met. So, I'm not trying to -- I'm just trying to understand that a little bit.

Kevin Latek: This is Kevin. I'd come back to; we made more money in Presidential than we did four years ago. We made more money in state and local races than we did four years ago. We made more money in house races than we did four years ago. We have more money on ballot initiatives than we did four years ago, all of which was consistent with our expectations going into this year. Our internal expectations and I think where everybody else got ahead of it was the Senate. And we had we look at the results today and we see really, really close results in places, where Gray has a big footprint, Arizona, Nevada, Wisconsin, Michigan. And frankly, the spending was not -- the spending by both sides did not match the way the polls worked out. And this happens from time-to-time. Sometimes there's a lot of money spent and a candidate turns out to be well ahead of another candidate, and yet a ton of money was waste on that race. There's a couple of examples of that just this week. And there are sometimes the flip side, there are races, where not a lot of money was spent and nowhere near as much as people expected, because the polls indicate that they're coming. It turns out that the competitor was a lot stronger, the race was a lot tighter than people expected. And unfortunately, again, for us, that was four Senate races and happened to be states, where Gray has stations in most, if not all the markets. So, this is entirely a story about Senate races for Gray. It's not about money leaving our markets. We got the same political share of dollars that came in the market that we got four years ago. We excelled in every category, but there was a shortfall from what we would have expected in a handful of very expensive Senate races. That's the story. It's not about people had a lots of expectations and we have internal expectations, which we obviously never share, because we believe it's really, really hard to predict these races with any kind of certainty. And we've said that in 2022 quite a bit and other folks have felt confident to give political guidance and that's their right and make political estimates on broadcasters and that's people's right. But we've cautioned it's really, really difficult and lots of people are going to exceed and some people are going to miss just based on factors completely beyond our control. And I think you've seen that not just with Gray and our Senate outcome, but I think you've seen that in the whole sector. Some people really beat the Street's expectations and some did not. And that's based on factors that none of us can control. So, long as we're getting our market share, we're doing what we can. But we can't force a party to spend another $100 million in the state of Nevada, which may or may not have changed the outcome of the race there.

Doug Pardon: That context is exactly what I was looking for, super helpful. So, long and short of it, no structural issues with the footprint. My last is just more a comment. I know people asked about the dividend. We are shareholders. I would just point out that we think the ability to take some of that cash and buyback debt at significant discounts is really helpful for shareholders, reduces interest expense and you kind of compound that over time. It could really help with your deleveraging strategy. But thank you guys for the questions.

Hilton Howell: Thanks, Doug. Appreciate the comments.

Operator: All right. Next up, we have Craig Huber of Huber Research.

Craig Huber: Thank you. I'll try to make this easy for you. I'll go one question at a time. On the regulatory front with the new administration starting January 20th here, what are your expectation for any potential changes with the ownership cap, regulatory environment here for M&A in the broad media space in general? Let me start there, please.

Hilton Howell: We would expect that the FCC will be deregulatory on ownership and much just as importantly, if not more importantly for our future on ATSC 3.0 NextGen Matters, and a series of operational issues for broadcasters and other regulated entities. In terms of specific policies, that's going to depend on the outcome of some pending court cases, further guidance from the courts on the SEC's actual jurisdiction and absolutely, who the commissioners are going to be. So, I would say broad strokes headlines, we see a deregulatory SEC coming, but I don't think we're really in a position to be handicapping specific policy issues right now.

Craig Huber: And then longer term, what is your goal here for your net debt-to-EBITDA ratio on a two-year basis?

Hilton Howell: Yes. On a two-year basis, Craig, look, longer term, the company has been -- it has levered up to make acquisitions and then aggressively repaid debt. I think we're proving that we're getting back to the repaid debt piece of that by our actions so far and our expectations for the rest of the year. And so, look, longer term, it gets more comfortable when we're below four. but I realize that's a little ways away still. So, we have the liquidity, we have the runway from a maturity profile point of view to get there. It's just going to take beyond the 26 political cycle when we've got the next big influx cash to get us back down into the fours and ideally right around that four times number longer term.

Craig Huber: All right. The next question, guys. On the cost cutting front, you talked about the $60 million. I appreciate that. Do you feel there's significantly more cost that you could take out in another round here if you take out over the next 12 plus months without doing damage to the business, of course?

Hilton Howell: Yes. I would say, yes, I don't think that there's necessarily look, we did a pretty thorough review here, and we're going to -- we'll continue to watch things, and as things come up, we'll be aggressive on renegotiating. I think the bigger cost saving side for us more impactful will be, where we land on the affiliate renewals. So, the pinch point on that is 2025 and we renew all of them over the next 14 months. So, that's the next part of the discussion.

Craig Huber: Okay. And I had last question, on the core advertising outlook for the fourth quarter down 10% or so. If you would -- in your mind, I know this is hard to get to, if you would adjust it for political crowding out the SEC Football, you chatted about stuff, where do you think that number would land at? Is it close to flat or slightly down? What do you think?

Pat LaPlatney: The crowd out from SEC?

Hilton Howell: The crowd out plus SEC, where do we landed?

Craig Huber: Yes.

Hilton Howell: Yes. look, we would have a lot more inventory to sell without the political crowd out. And then the SEC moving to Big 10 on CBS moving to Big 10 from SEC, it costs us a couple of -- it costs us a few points in terms of the change in the overall revenue line item.

Craig Huber: You take that and again, the political crowding out, if you could remove those, you think you'd be much closer to flatter. And so, when you get to what do you think the underlying growth is right now in the marketplace for your TV advertising just for those two items?

Hilton Howell: Look, there's a lot of noise in it right now. It's hard to quantify a specific number on that and we really haven't historically quantified what exactly we think the crowd out number is. What we can tell you is what we see in the data as we sit here today. And as Pat described in our guide covers that, and as Pat described it, there's reasons for cautious optimism from here based on what we're seeing. But it's -- there is hesitancy to commit for the near term. And so, we're starting to see some of it. but it's too hard to -- can't give a specific number on any of this stuff right now.

Craig Huber: Okay, fair enough. Thank you, guys.

Hilton Howell: Thank you.

Operator: All right. Next up, we have Michael Kerrane of Truist Securities.

Michael Kerrane: Hey. Good morning. Thank you for all the color on political. I just want to follow up on the regulatory question. If specifically about the potential opportunity for you guys, if you're allowed to own more than one station in a market, is that something that will be a huge opportunity for your margins and operational costs if you're able to consolidate within a single market?

Kevin Latek: This is Kevin. It depends on the station we acquire. If we have -- in our 113 markets, we have lots of markets with more than one station. If the second station we acquire is a CW or a My Network, or a Telemundo, it's not particularly helpful if we require a big four affiliate that doesn't have any news and we put news on it. There's not -- there's going to be certainly additional revenue, but not a lot of cost to take out. If it's two stations that have pretty significant overlapping tasks and facilities, then there's more synergies. So, the industry just went through 15 years of creating duopolies. and I think there's a pretty good track record of companies identifying synergies when they're buying in market stations with local news, where they already have a local news station. So, the amount is going to completely depend on the market and the type of stations that we're putting together. So, we're obviously -- we've been pretty active in that space and we would expect to continue to be active if opportunities present themselves and the balance sheet permits it.

Michael Kerrane: Great. That's all I had. Thanks.

Operator: All right. Next up, we have Bill Matthews of MUFG.

Bill Matthews: Hi, great. Thank you for taking the question. Many of my questions have been answered. When I kind of wanted to circle back on some of the comments that you've made in terms of the sub-losses, a huge concern beyond your control. The political spending and predicting races very difficult to predict. And then the cost saves of $60 million what's clearly in your control, common dividend and the dividend of the preferred. You've had a previous person, who is an equity holder voice that it would be helpful for the equity to reduce your debt. So, is there a conversation in the boardroom? Is there a voice in the boardroom that is advocating to take that $80 million and even pause it for a year until you get your leverage down?

Jeff Gignac: Yes. So, it's Jeff. So, look, we -- like I said, we talk about this on a quarterly basis. The $80 million that you referenced includes the preferred dividend. So, from a rating agency standpoint, they count that as debt. They count that as an uptick in debt. So really, the savings from a -- and from an equity point of view, it's in front of the equity holders. So, we think about it as the $30 million, whatever discount you could capture with the full $30 million or $80 million if you went down that route. We talk about it each quarter and we'll continue to evaluate where things are in the business with the leverage profile, et cetera, as we move into 2025.

Bill Matthews: I mean, I would just follow up. There's $440 million of interest expense on the debt. The Series A preferred is a pickable instrument at the board's discretion. And if you look at the equity reaction today to the results, I think there's a lot you're managing and managing well with what you have, but you're compounding the difficulty with the leverage. And so, if you can eliminate that leverage, that value will accrue to the equity.

Jeff Gignac: Yes, I understand. I'm just I guess the point that I was making is that if we pick the preferred, it works against what you're -- it works against that calculation. It's $50 million that works the opposite direction by picking. But point taken, I understand your point.

Bill Matthews: Okay. Thank you.

Operator: All right. Next up, we have Alan Gould of Loop Capital.

Alan Gould: Thanks for taking the question. I've got a broader question on political. I mean, it seems like political fundraising was higher than ever. And if I look across the spectrum, it's more of an industry question, it looks like almost every player with the potential exception of FOX, is going to have disappointing relative expectations on political advertising. So, are we seeing a reallocation of political dollars, yes, out of broadcast into CTV, people spending more time on podcast to reach the audience? Is there a structural change occurring? And also, related to this, if you look typically 4Q political used to be 75% to 100% greater than 3Q, we're not seeing that this year. Was there some pullback? Any reason why 4Q is so much weaker relative to its normal results versus 3Q? Thank you.

Hilton Howell: Hey, you want to start with the 4Q, Kevin?

Kevin Latek: Let me put the number up on it.

Hilton Howell: Yes. Okay. Sure. Yes. Look, so we believe some money is going towards CTV, but we don't believe there's any kind of fee change there. There is more money going in there in other media than it used to be. I think that's pretty basic. And it's not something that's foundational or structural, or any of those grand words. At the end of the day, there's a change. But for us, the impact in our political was simply a function of money moving from state to state. In terms of your question around the fourth quarter, I think Kevin and Jeff.

Kevin Latek: Sure. If I go back to 2018 on our combined historical 2018-2020, so I'm talking about the our current footprint. Our fourth quarter was 55% of the total 55% of the total, 50% of the total, 51% of the total. So, I don't see a sea change here. In the third quarter, our political revenue is 30%, 32%, 28%, 35%. So, the allocation of the dollars is frankly pretty stable across the four. The one thing that we have seen slightly change are primaries. We have a presidential primary that pulls some more money into the first quarter. State and gubernatorial elections, those primaries tend to be a Q2 event. So, sometimes we see a bit more in certainly in 2018 and 2022, which is very heavy on gubernatorial races. You see sort of a bigger Q2. But we've never talked about Q4 as a factor of Q3. We instead look at how the dollars have been allocated by quarter over the last now four cycles with our current footprint. We're seeing the fourth quarter was consistent with the others. It was a bit more than half of the total in the fourth quarter. In the third quarter, it was about right around 30% to 35% every year. So, I'm not really seeing the numbers reflect any particular concern here for at Gray.

Alan Gould: Okay. Thanks, Pat. Thanks, Kevin.

Kevin Latek: Sure. Thanks.

Operator: All right. Next up, we have Daniel Kurnos of The Benchmark Company.

Daniel Kurnos: Yes. Thanks. Good morning. I'll take it a little one step further, Hilton, on regulatory. If the FCC, not the FCC -- if Congress were to eliminate the ownership cap, what's your openness to some kind of transaction buyer-seller merger in order to unlock incremental value with stock?

Hilton Howell: I hope you answered that. I'd be very open to consider anything.

Daniel Kurnos: That's helpful. Pat, nitpicky, but the shift from SEC on the local, the network change there, is there any cash flow ramification? Or is that all just a revenue impact?

Hilton Howell: It's revenue.

Daniel Kurnos: Okay. And then, Jeff, just appreciate the deep dive on the expenses. Just trying to get a sense and obviously, you mentioned the big delta could be on the affiliate side. but like how do we think of '24 going into '25, your need to reinvest something in growth or headcount, like what are the offsets to what you've just taken out or can we just kind of look at where we think the year ends up, and then we've got our kind of our run rate here?

Jeff Gignac: Yes. So, at a macro level, I would say this is against the current run rate. There will be -- there will still be some typical adjustments that you might see for employee raises and things like that going into '25, sort of the natural stuff in the business. So, I think what we've talked about here is to bend the curve and flatten this out, and ideally, try to bring it down where we can. But on our last call, we talked about taking a very thoughtful approach. And so, the things that we did are really more managing the business in a smart way and thinking about how can we do things in a better way, but still serve the communities, still make sure we have local news in all of our markets, all of the things that are hallmarks of the success of this company.

Daniel Kurnos: Got you. I'll sneak one last one in, I guess, maybe for Kevin, just on political, looking at '26, obviously, there's going to be some angst, I think, to try to combat what just happened. So -- and then in '28, we have two open primaries theoretically. So, I don't know if that gives you any more confidence. I know obviously you guys have spent the entire call today telling everybody that you did a good job in political. But if it just kind of helps frame how we should be thinking about the competitive nature of the races in the next two cycles relative to your footprint might be helpful.

Kevin Latek: You're absolutely right. At '26, we should have not one, but two presidential primaries. We've not had that for quite some time now. Sorry, '28, '28. In '26, remember, the Senate being up every six years, we get sort of a random selection of competitive versus uncompetitive races. The off year is always very, very big with gubernatorial races, state races. I do not anticipate that this election is going to unify America and we're going to suddenly have a quiet, non-terribly competitive round of elections in two years. I suspect we'll continue to see high political engagement and high stakes for both parties. So, I -- yes, I just don't see things becoming returning to any kind of more calm political situation in the next two years or four years, people will continue to be engaged with ever more complicated issues.

Daniel Kurnos: Okay. Thanks for bearing with me guys. Appreciate it.

Hilton Howell: Thank you.

Operator: All right. Next up, we have Steven Cahall of Wells Fargo.

Steven Cahall: Thanks for squeezing me in. Maybe, first with a more favorable FCC deregulatory backdrop, can you just expand on maybe end market duopoly opportunities? I know this question came up before. But I'm just wondering if you think the FCC might allow just threes and fours, could it even allow some twos in there? And if there's any way to size or dimensionalize what a significant opportunity that could be for the industry, love to hear more on that.

Hilton Howell: Sure.

Steven Cahall: And then Kevin, I think you both talked about the reverse compensation expenses, a big focus for year. Just wondering how early you start to have those conversations with your major counterparty. They're going through a lot of management changes. I don't know if that makes things easier or harder and if you've learned anything from some of the recent peer renewals, but we just love to get some more color there as well. Thanks folks.

Kevin Latek: On the FCC, look, we don't know exactly who the five commissioners are going to be. There are a number of pending court cases involving FCC decisions in broadcast area and non-broadcast areas that will inform their authority. So, I don't know quite how we could start to pining on whether the what a new FCC rule may look like that would be proposed, at what point next year by what FCC given what new guardrails may be imposed as a result of the pending court cases. And remember, there's also court cases not involving the FCC that address administrative law that can also impact what the SEC can do. So, I don't know how to, again, go say anything more than we expect the SEC will be deregulatory, and we think that they will address ownership and 3.0. But I don't know who has that crystal ball. and if so, I wish they would have told us the results of the election a couple of days ago. I just think that's impossible. On network, our network conversations tend to happen fairly close to the expiration date. We start talking months earlier, but they tend to like retrans tend to get serious towards the very end. As you know, ABC is up end of this year, CBS, FOX next summer, NBC end of the year. So again, I think those conversations will get serious a month or two beforehand. And I don't -- your last question, I haven't learned anything from my peers with recent renewals, because we have no absolutely no clue what the terms are in any other network affiliation agreement other than our own, literally have not. No one talks about it. All we can see is the aggregated number reported by public companies across all their network contracts. So, we literally have no -- we have no intel on what our peers are paying the networks or what their structures are, absent what they would say in a public in the earnings calls. That's all the insight we get. So, I don't know how to answer that anymore sort of clearly, except we've been very clear about our own situation and the strength of our stations and what we deliver to these networks in terms of reach and eyeballs that they monetize for advertising and that they use to promote their programs that they then monetize in the aftermarket. So, we know our situation, they know we're delivering and that's what we're going to talk about. I hope that helps.

Steven Cahall: I hope that helps. Thank you.

Operator: All right. Next up, we have David Hamburger of Morgan Stanley.

David Hamburger: Thank you very much for taking the question. Jeff, last quarter, you had mentioned that you expected leverage to end the year in the low-to-mid 5s. Can you update us on where you think leverage will now shake out for the year end? And how should we think about 2025? I know you spoke about kind of longer term. But could we expect to see some debt reduction next year? And how will you execute on that?

Jeff Gignac: Yes. Let me take the second part first. In '25, some of the actions that we took are designed to make sure that we have the ability to continue to pay down our debt going into '25. So that's part of the overall plan. With respect to where we finish '24, depending on open market activities and things like that, we should be flat to maybe slightly down from where we are today, for the third quarter by the end of the year.

David Hamburger: Okay.

Kevin Latek: So, we're running late into the first after earnings call that we need to get to. So, at this point, we're going to need to wrap up the -- end the public calls. And I apologize, we see there's a couple other folks still in the queue. I think we have calls scheduled with all of you individually. So, we do need to end this to stay on schedule for the rest of the day. So…

Hilton Howell: Well, thanks everyone for being here. We're actually quite proud of our quarter and most particularly, we're happy we stack up against our peers in terms of our both our core and our political advertising. And we're particularly proud that by the end of the year, we will have paid off $0.5 billion in debt, which I'm actually pretty impressed with and pretty proud of. Thank you all for spending time and we look forward to talking to you next quarter.

Operator: All right, ladies and gentlemen, this does conclude your call. You may now disconnect your lines and thank you again, for joining us today.